Finder’s Fee Arrangements and the Property Manager

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By Michael Geo. F. Davis, Attorney at Law

Many owners, more so when times are economically challenging, opt to manage their own properties. The inexperienced owner’s failure to comply with the law can result not only in the loss of his resident but also considerable financial liability to the resident. The owner may feel – rightly or wrongly – that his manager, being the licensed professional in the rental transaction, should have provided him with more basic information on the landlord/tenant relationship, or at least provided sources to obtain such information. A disgruntled owner may file a FREC complaint and potentially a legal claim against the manager. This is not to suggest that every owner will pursue administrative or judicial remedies, or that the owners will be successful. However, even if the manager prevails in such a scenario, it would have been better to have avoided the time, hassle and expense.

Aside from the legal risk avoided, a manager can generate some good public relations from the repeat business or referrals from the landlord who feels that his manager left him adequately informed and prepared to protect his valuable rental investment.

The Agreement

The obvious beginning to a successful relationship is the Finder's Fee Only Non-Management Agreement itself. This document will set the level of the owner’s expectations. The agreement must clearly outline what the manager’s duties are, and perhaps as importantly, what the manager’s duties are not. Note that one of the most common initial noncompliances by the tenant is the failure to transfer the utilities out of the owner’s name. The agreement should contain language addressing the agent’s level of involvement concerning this issue. The agreement should not contain ambiguous or overly broad language that can give rise to unwarranted assumptions. Most importantly, the agreement should unequivocally state when the manager’s obligations are fulfilled and the Agreement is completed. It is advisable to obtain the owner’s written acknowledgement that the Agreement has been completed to avoid any misunderstandings.

The manager should understand that the safe harbor of a completed agreement is lost when he enters into oral arrangements with the owner to "follow-up on one more thing" or "handle one last snafu." It is incumbent on the manager to have any modifications in writing, because the most innocuous follow-up item can expand expectations and expose the agent to liability. In the era of emails, there is almost no excuse for a confirmation of exactly what additional work is being done.

The leasing documentation

When the agreement is completed, the owner’s documents should be sent to him. The owner is the owner of and has a right to all information or copies of the file, excepting only the credit report, redacted social security numbers in the application and any manager personal notes. Under the law of agency, since the manager is the agent and the owner is the principal, the owner has a right to the information in the file, including the resident’s application. Social security numbers should be redacted from the application to prevent potential liability for misuse. The Fair Credit Reporting Act prevents giving the credit report. The owner is not entitled to any personal notes of the manager, as they are the property of the manager. Returning the owner’s documents would be evidence that the parties have concluded their business arrangement.

The information sheet

A manager should now consider sending the owner a standardized information sheet. While the manager may not be under any legal duty to do so, it is worth remembering that the owner who can find answers to his questions on his own will be less inclined to need the manager’s assistance. A word of caution is in order: include appropriate disclaimers that the sheet is offered for informational purposes only, is not a complete reference regarding landlord/tenant law, is not offered as legal advice, and that the owner should always consult his own attorney.

Another advantage of the information sheet is that it may now dawn on the owner as to how much more will be involved in managing the rental than simply collecting rent checks. This may give the manager the opening to discuss a continuing management arrangement.

Items to include in the information sheet

Consider including on the sheet: 1) A link to the Florida Residential Landlord/Tenant Act, Part II of Chapter 83 of the Florida Statutes located at The Florida Legislature On-Line Sunshine  Note that the On-Line statutes will not reflect any changes by the most recent legislative session.

2) The most common landlord/tenant dispute probably revolves around the security deposit. An owner who fails to comply with FS 83.49 will try to say that the manager did not inform him of the statutory requirements. It is crucial that the manager have solid proof regarding the owner's indication of a Florida bank and that the manager sent the owner the information on complying with FS 83.49. The manager should keep a detailed paper trail. For this reason it is a good idea to attach to the information sheet a copy of FS 83.49 and a Notice of Intention to Impose Claim on Security Deposit.

3) Most owners find that attempting to wade through the Landlord/Tenant Act is a confusing and daunting task. For that reason the landlord may wish to list the websites of one or more attorneys whose area of practice is residential landlord/tenant law, such as the website of our firm, the Law Offices of Heist, Weisse & Davis, P.A., located at www.evict.com.

Websites such as ours contain a wealth of articles on all aspects of landlord/tenant law and numerous forms designed to meet most landlord needs, with the assurance that the forms are current. This is not always the case with forms purchased off the shelf at office supply stores. At our website, the owner will have the option to register his email to receive our monthly newsletter. The newsletters provide information on legislative and administrative proposals, on statutory and rule changes, on the focus of current enforcement policies, as well as various legal articles. Among the more common topics to be found in over 175 legal articles are: three day notices, seven day notices, unauthorized occupants, unauthorized pets, abandonment of the premises, noise disturbances, notices from the tenant of an intent to break the lease or withhold rent, bankruptcy notices, timeline for evictions, partial rent payments, accumulation of late charges and utility bills and numerous fair housing issues.

4) The website of the Florida Apartment Association (FAA) and the National Association of Residential Property Managers (NARPM) both contain links to local Florida chapters. The wealth and experience of the members of these associations are invaluable. Many phone calls and emails that would be directed to the managers will be easily answered by association members.

5) Managers should encourage their owners to attend a landlord/tenant seminar including a segment on how to set up a proper eviction action. These seminars are offered by several individuals and entities. Many apartment associations and residential property manager associations offer the classes. They usually vary in length from 2-6 hours, and the cost is quite reasonable. Most classes, such as our firm’s seminars, offer form books, which are invaluable for use in preparing the statutorily required legal notices. In evaluating your choices for seminars and their presenters, you may wish to consider if the presenter or its organization would be available to represent you in court in a landlord/tenant lawsuit.

The unrealistic owner

Even after all that the manager has done to prepare the owner, the manager will on occasion meet the owner whose unrealistic self-serving expectations will make it impossible to reach a compromise. At this point it may be advisable for the manager to consult an attorney to discuss a possible FREC complaint and owner lawsuit. The lengths that manager has taken to assist, educate and protect the owner will serve to demonstrate the manager’s good faith, professionalism and genuine concern for the welfare of the owner.